Strategic managementaccounting: how far have we come

in 25 years?Kim Langfield-Smith

Monash University, Melbourne, Australia

Abstract

Purpose – The purpose of this paper is to provide a review of the origins of strategic managementaccounting and to assess the extent of adoption and “success” of strategic management accounting(SMA).

Design/methodology/approach – Empirical papers which have directly researched SMA andprior review papers of the adoption and implementation of SMA or SMA techniques are reviewed. Aswell as assessing the extent of adoption of SMA and the reasons underlying an apparent low adoptionrate, the role of accountants in adopting and implementing SMA is considered. Finally, the success orotherwise of SMA is discussed.

Findings – SMA or SMA techniques have not been adopted widely, nor is the term SMA widelyunderstood or used. However, aspects of SMA have had an impact, influencing the thinking andlanguage of business, and the way in which we undertake various business processes. These issues cutacross the wider domain of management, and are not just the province of management accountants.

Research limitations/implications – There is limited value in conducting future surveys of theadoption and implementation of SMA or SMA techniques. Rather, the focus should be on howSMA-inspired techniques and processes diffuse into general practice within organizations.

Originality/value – Twenty-five years after the term strategic management accounting was firstintroduced in the literature, this paper brings together disparate literature and provides a broadassessment of the “state-of-the-art” of strategic management accounting to inform researchers andpractitioners.

Keywords Strategic management, Accounting, Activity based costs, Budgetary control, Target costs

Paper type Literature review

IntroductionIn 1981, Simmonds published a paper in the UK professional magazine, ManagementAccounting, in which he presented a strong case for the adoption of strategicmanagement accounting (SMA) (Simmonds, 1981, p. 12). Many professional andacademic papers continued this theme, culminating in an influential paper byBromwich (1990) and the book Pathways to Progress (Bromwich and Bhimani, 1994) Atthe same time in the USA, influential academics such as Robert Kaplan, Robin Cooperand John Shank were vocal critics of the state of management accounting and urged usto improve our relevance by adopting strategic cost management (SCM).

On both sides of the Atlantic, case studies were published that demonstrated thesuperiority of SMA or SCM over traditional forms of management accounting, and the

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The author is grateful for comments received from attendees at the 5th Asia PacificInterdisciplinary Research on Accounting Conference, Auckland, July 2007. The paper alsobenefited from constructive comments by the journal referees and David Smith.

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Received July 2007Revised September 2007Accepted November 2007

Accounting, Auditing &Accountability JournalVol. 21 No. 2, 2008pp. 204-228q Emerald Group Publishing Limited0951-3574DOI 10.1108/09513570810854400

need to take a strategic perspective to management accounting became the acceptedwisdom. However, various surveys of practice in the 1990s indicated that the uptake ofSMA was slow. Some commentators asked whether SMA was “a figment of academicimagination” (Lord, 1996) and others questioned whether accountants had the capacityor the skills to make SMA a success (Cooper, 1996a, b). Despite the evidence, severalcommentators continued to believe that it was only a matter of time before SMA wasadopted widely across industry and that it would emerge as a major force in shapingmodern management accounting (Bromwich and Bhimani, 1994; Dixon and Smith,1993; Roslender, 1995).

As it is now just over 25 years since Simmonds first introduced the concept of SMA,it is a reasonable time to assess its progress. The purpose of this paper is to provide areview of the origins of SMA and to assess the extent of adoption and “success” ofstrategic management accounting. As well as reviewing empirical papers which havedirectly researched these issues, prior reviews of SMA adoption and implementationwill also be utilized. Thus, in some respects this paper is a “review of reviews” of SMA.As well as assessing the extent of adoption of SMA and the reasons underlying anapparent low adoption rate, the role of accountants in adopting and implementingSMA is considered. Finally, the success or otherwise of SMA is discussed.

The paper is organized as follows. In the next section SMAwill be defined. This willbe followed by a recount of the development and possible demise of SMA as providedin a recent chapter by John Shank (2007). Wider perspectives on the origins anddevelopment of SMA are then presented, drawing mainly on the works of Bromwichand Bhimani (Bromwich, 1990; Bromwich and Bhimani, 1989, 1994) and Roslender andHart (Roslender, 1995, 1996; Roslender and Hart, 2002, 2003). This is followed by aselective review of the literature that addresses adoption, implementation and successof specific SMA techniques and practices, which includes descriptive andtheoretically-grounded case studies, and surveys of practice. The role ofmanagement accountants in the adoption and implementation of SMA is thenconsidered, and in the final section the state of play of SMA is assessed andopportunities for future research are identified.

Defining the boundaries of SMAThere is no agreed definition of SMA in the literature. At its very simplest, SMA isabout making management accounting more strategic (Roslender and Hart, 2003, p.272). Simmonds defined it as “the provision and analysis of management accountingdata about a business and its competitors, for use in developing and monitoringbusiness strategy” (Simmonds, 1981, p. 26).

Bromwich (1990, p. 28) provides a definition that limits SMA to financialinformation, but which is focused on performance relative to competitors:

The provision and analysis of financial information on the firm’s product markets andcompetitors’ costs and cost structures and the monitoring of the enterprise’s strategies andthose of its competitors in these markets over a number of periods.

The confinement of SMA to financial information and costs may be regarded by someas limiting; many consider that non-financial information is an important component ofSMA.

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Some commentators define SMA as a process. For example, Lord (1996) describesSMA as a six-stage process as follows:

(1) Collection of competitor information.

(2) Exploitation of cost reduction opportunities.

(3) Matching of accounting emphasis with strategic position.

(4) Collection of competitor information.

(5) Exploitation of cost reduction opportunities.

(6) Matching of accounting emphasis with strategic position.

Dixon and Smith (1993) present four stages to their SMA process: strategic businessunit identification, strategic cost analysis, strategic market analysis, and strategyevaluation.

Like many SMA commentators, Lord (1996) and Dixon and Smith (1993) see SMAas lying at the interface of management accounting and strategy. However, some otherauthors see marketing as the more relevant orientation for SMA (See, for example,Foster and Gupta, 1994; Roslender, 1995, 1996; Wilson, 1995). Roslender and Hart(2002, p. 269) argued that SMA should become “more thoroughly infused withmarketing issues, theories and concepts to form a ‘marriage of equal partners’”. Theresultant “brand management accounting” would include performance measures suchas market share, market growth and brand strength, and customer profitability reportswould focus on sub-brands and specific market offerings.

While SMA is a term used by accounting academics and sometimes practitioners inthe UK, Australia and New Zealand, in the USA the term strategic cost management(SCM) is more commonly used in the literature. Shank and Govindarajan (1994, p. xiii)describes SCM as “the blending of the financial analysis elements of three themes fromthe strategic management literature – value analysis, strategic positioning analysis,and cost driver analysis”. Clearly, this description of SCM has similarities with SMAprocesses, as described by Lord (1996) and Dixon and Smith (1993). However, somewould view SMA as broader than SCM.

A unifying link between these various views and definitions of SMA (and SCM) isthat SMA entails taking a strategic orientation to the generation, interpretation andanalysis of management accounting information, and competitors’ activities providesthe key dimension for comparison.

A range of techniques have been included under the umbrella of SMA, and somecommentators define SMA in terms of its techniques. These include target costing,life-cycle costing, strategic cost analysis, competitor cost analysis, activity-basedcosting, activity-based management (sometimes called activity-based costmanagement), attribute costing, life cycle costing and strategic performancemeasurement systems. However, some commentators reject the idea thatactivity-based costing is a part of SMA, as the focus of ABC is on the accuracy ofcost allocation, not strategic support. While these techniques may contribute tomeeting the needs of organizations, particularly where cost provides a competitiveadvantage, there are clearly broader strategic notions captured under SMA.Interestingly, over the past 25 years, the majority of published empirical researchhas focused on the adoption and implementation of specific SMA techniques, and

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activity-based costing in particular. In this paper, activity-based costing will beconsidered a part of SMA.

A North American perspective – John ShankThe late John Shank published a chapter in Contemporary Issues In ManagementAccounting (Bhimani, 2007), titled “Strategic cost management: upsizing, downsizing,and right(?) sizing” (Shank, 2007). This chapter provides a fascinating and provocativeaccount of the development of what he variously calls “strategic accounting” and“strategic cost management”, from the perspective of one of its earliest andlongest-standing advocates. The chapter provides a US-centric perspective on thedevelopments and influences on the management accounting field, acknowledging thecontributions of, and linkages to, parallel developments in the UK. It is a very personalaccount of the growth, and what he saw as the decline, of SCM, and provides a goodcontext for considering the achievements and future of SMA.

Shank explains that following the emergence of strategy as an identifiable field ofstudy in the leading US business schools in the 1970s and early 1980s, and the move ofmany business disciplines to append “strategy” to their names – operations strategy,marketing strategy, organizational strategy – it was inevitable for strategicaccounting to emerge and supplant management accounting. Shank acknowledgesthat Simmonds’ (1981) seminal work in strategic management accounting contributedto his thinking at this time, and remembers with fondness discussions withdistinguished scholars including Michael Bromwich, Anthony Hopwood, RobertAnthony, Charles Horngren, and Robert Kaplan about the evolution in thinking thatwas taking place.

The emergence of SCM is described by Shank as the third stage of the developmentof the management accounting discipline: from cost accounting to managerialaccounting to SCM. Cost accounting transformed into management accounting in theperiod 1945 to the 1960s. While management accounting emphasized the role offinancial information in decision making across a range of business problems, it didnot consider, explicitly or even implicitly, the business context in which those decisionswere embedded.

Shank recalls his excitement, in about 1985, at the possibilities that the newstrategic focus could bring to the management accounting discipline and to business ingeneral. He regarded his widely quoted paper published in the first volume of Journalof Management Accounting Research, titled “Strategic cost management: new wine, orjust new bottles?” (Shank, 1989), as providing the direction for management accountingresearchers and practitioners. This paper was supported by a growing professionaland academic literature in both the USA and the UK that called for change in the focusof management accounting. The message that financially-focused managementaccounting systems and costing techniques were not providing useful information formanaging manufacturing operations was echoed in Kaplan’s and Johnson’s 1987 book,Relevance Lost. At this time, academics in both the operations management andaccounting literature supported and contributed to this message (Chenhall andLangfield-Smith, 2007). It was about this time that CAM-I was formed in the USA,being a consortium of people from industry, academe and government, to address therole of cost management in the advanced manufacturing environment.

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The rise of activity-based costing (ABC) and activity-based management (ABM) isseen by Shank as supporting the new ideas. Cooper and Kaplan were the mainacademic writers who promoted these techniques. Shank describes ABC as presentinga revolution in thinking and providing a way for accounting to become morestrategically relevant. Certainly, at that time, many academics and practitioners sawABC as providing a solution to the problems of irrelevancy. Shank describes anongoing debate between himself and Robin Cooper as to whether ABC was thecapstone of strategic accounting (Cooper’s view) or whether SCM was the umbrellaunder which ABC and many other techniques resided (Shank’s view).

The 1990s are described as “the glory decade” where academics, consultants andpractitioners all played a role in popularizing strategic accounting. Shank notes thatmany SCM tools were implemented as pilot studies in US companies and published asteaching case studies, or as chapters in books. Professional journals carried articleswith SCM themes and the training activities of professional accounting bodies focusedon SCM tools and techniques. Global consulting firms developed very active practicesin the area of SCM and some specialized in the design and implementation of specificSCM techniques.

In contrast to this activity, Shank notes that in many business programs traditionalmanagement accounting continued to be taught and none of the major US managementaccounting textbooks gave coverage to the new SCM topics. At this time Shankassumed this was simply a publishing time lag. However, during this period, an aspectthat disturbed Shank was the lack of involvement of “internal” accountingdepartments in SCM implementations in corporations. Again he assumed that thiswould be corrected over time. However, his colleague, Robin Cooper, expressed doubtthat this would ever occur, as accountants did not have the ability to learn “new tricks”.Cooper highlighted that SCM activity was developing outside of the view of theaccounting profession and he is quoted by Shank as saying that accountants are“intellectually and emotionally un-equipped” for the transformations (Shank, 2007, p.359). At that time, Shank still disagreed with Cooper’s views.

Shank chronicles the “unraveling of the pieces” from 2000 to 2005 and documents alitany of troubles that cast doubt on the future of SCM. He noted with surprise thatcompanies that he had documented in case studies, and other corporations that hadstarted to implement SCM, had not moved beyond pilot studies or cameo pieces, andfew could showcase their success. The decline of management accounting as aprofession in the USA was apparent in their changing focus. The North Americanprofessional bodies that had been dedicated to management accounting – IMA in theUSA and CIMA in Canada – faced a shrinking membership and their attempts toreposition their professional magazines as “strategic” were not successful. The topic ofmanagement accounting was dropped from the core curriculum of major US MBAschools and the large SCM-based management accounting practices of the accountingand consulting firms were dying. The staffing levels of accounting functions incorporations in the 2000s were close to 1 per cent of total staffing numbers, whereas inthe 1980s it was typically 2 per cent, and in the 1960s it had been 4 per cent.

The 2000s are seen as a time when the priorities of US companies and CFOs wereshifting. Highly publicized corporate collapses led to increased pressures for tightinternal controls and fraud detection. This occupied the attention of many corporateaccounting departments and left little “emotional energy” for considering the strategic

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use of accounting information. The implementation of new international financialreporting standards (IFRS) had become a high priority for many CFOs. Shank suggeststhat the strategic accounting implementations that did take place were more likely tooriginate from “shadow” accounting staff who did not report to the CFO, than from theaccounting staff themselves.

The chapter concludes with Shank musing that accountants have the intellect andcan be trained to adopt the broad focus needed for the transition to SCM, butcommiserates that this may not occur in the environment of Sarbanes-Oxley and withthe increasing pressure of the capital markets for quarterly profit earnings results.

This is a rather negative view of the progress and the future of both managementaccounting and SMA. But is it an accurate depiction of the situation? Is Shank’sinterpretation of the US experience similar to what has been experienced by others inthe USA or in other countries? What evidence do we have about the adoption and useof SMA in other parts of the world – UK/Europe, Australia and New Zealand?

Wider perspectives on SMA – Bromwich and BhimaniIn 1981, Simmonds claimed that SMA was “spreading rapidly in practice” and that“management accountants are spending a significant proportion of their time andeffort in collecting and estimating cost, volume, and price data on competition andcalculating the relative strategic position of a firm and its competitors as a basis forforming business strategy”(Simmonds, 1981, p. 26). This is a curious claim, as in lateryears, several writers maintained that such practices have not been adopted widely(Guilding et al., 2000; Lord, 1994, 1996; Shank, 2007). Was Simmonds exaggerating, orwas he using the term SMA, or viewing SMA, more loosely that of subsequentresearchers and writers?

In the years following Simmonds (1981), many papers that promoted SMA appearedin the professional literature and were largely normative papers or descriptive casestudies. It was not until the late 1980s that more significant academic writing emergedpresenting SMA within a more theoretically-grounded research framework. Prominentwere works by Bromwich (1990) and Bromwich and Bhimani (1989, 1994).

The economic case for SMABromwich (1990) provided persuasive arguments in favour of SMA. Compared topapers, which up to that time relied on common sense to justify the case for SMA,Bromwich draws on economic theories. He stated that we need to release “managementaccounting from the factory floor” to assist it to meet the global challenges in productmarkets, and to allow management accountants to focus on the firm’s value-addedrelative to competitors. There are two key themes captured in this paper.

The first theme, is that products are desired for the attributes that they provide(Lancaster, 1979), and, thus, accountants have a role to play in costing various productattributes and monitoring the performance of such attributes over time. “Attributecosting” would require accountants to embrace strategic information as well as costinformation. This would entail costing the attributes or characteristics provided bygoods and monitoring and reporting these costs regularly. However, information aboutthe demand and cost factors associated with those attributes must be relative to thoseof current and future competitors. To survive, a firm must continue to offer thecheapest way for consumers to obtain the desired bundle of attributes. Bromwich

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stated that this may require some organizational restructuring to enable the accountingand finance functions to be situated closer to the function that require and work withthis new information. In a later work, Bromwich explained that attribute costing wasquite distinct from ABC and ABM: ABC/ABM costs the functions in the value chainthat provide value to the customers, whereas under attribute costing it is the attributesprovided by a product that customers desire which are costed (Bromwich and Bhimani,1994, p. 128).

The second theme draws on the theory of contestable markets, which suggests thata company needs to maintain its cost advantage over current and potential competitorsto have a sustainable strategy (Baumol, 1982; Baumol et al., 1988). This will involvereporting on the cost structures of competitors and potential rivals, to survive in acompetitive market that is horizontally differentiated. The costs of barriers to entryand sunk costs related to those cost barriers, requires accountants to adopt a moreexternal focus to cost analysis (Bain, 1965).

In their books, Management Accounting: Evolution not Revolution and Pathways toProgress, Bromwich and Bhimani (1989, 1994) provide a commentary on the US“relevance” debate and the state of SMA on both sides of the Atlantic, as at that time.There are several aspects of these books that are relevant for this paper.

Management accounting in crisis?Bromwich and Bhimani (1994) rejected the US view that management accounting wasin crisis. They suggested that the real issue for management was the inappropriatenessof continuing to maintain the short term and internally-focused approach of accountinginformation in the face of intense global competition that demands goals of long-termsustainability and strategic positioning. They questioned the prevailing wisdom of thetime that the “perceived malaise” of management accounting was attributable to itssubservience to financial accounting. Rather, they suggested it was attributable to alack of ability among senior corporate managers who allowed this to happen, andsuggested that the conditions documented in descriptive US case studies revealed thatmuch more than just the accounting systems needed to change. They saw a majorbenefit of the new costing techniques, as revealed by many of the published casestudies emanating from the USA, as making visible weak management strategies.

Bromwich and Bhimani’s (1994) view was that there were strong argumentssupporting the contention that traditional forms of management accounting werebased on redundant assumptions. In particular, they saw ABC as having the potentialto overcome some of the problems of conventional management accounting techniques,through providing a better understanding of how overheads vary in relation to a rangeof cost drivers, and viewed statistical studies as supporting the notion that non-volumerelated activities may drive costs.

The slow take-up of SMA techniquesBromwich and Bhimani reviewed the findings of major surveys of practice in the late1980s and up to 1994, in the UK and North America, which led them to conclude thatthere had been a low level of adoption of SMA techniques. However, the surveys foundthat SMA techniques were generally regarded by adopters as useful, and there wereclear indications among survey respondents of their intent to adopt ABC in the future.

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Like Shank, they noted that a number of the published ABC implementations werepilot studies, and few companies were using ABC in any major applications – theysuggest an adoption rate of ABC of 10 per cent. Their review of the published evidencereveals disconnect between the rational arguments provided by academics and othercommentators, and the uptake of such practices, and like Shank they considered thatwide-scale adoption was only a matter of time. Gosselin (2007) was to later describethis disconnect as the “ABC paradox”. This is captured in two quotations:

Techniques such as activity based costing and product life cycle costing no doubt arereasoned on logical terms and it may be posited that once accountants, managers, and otherpotential processors and users of accounting information comprehend more fully theimplications and rationales underlying their use, increased application will follow (Bromwichand Bhimani, 1994, p. 202).

Changes in practice tend to lag behind the views voiced by certain consultants, academicsand practitioners. Exhortations favouring alterations in accounting techniques in many casefall on deaf ears . . . Theoretical rationales underlying such call are persuasive . . . managers’practical wisdom for side stepping normative calls for change often prevails (Bromwich andBhimani, 1994, p. 207).

Bromwich and Bhimani (1994) suggest that this accounting lag may be due toresistance to change that can arise from an adverse effect that a move to ABC can haveon short-term profits and perceptions of the capital markets, as well as unfavourablechanges to employee’s performance reports in response to the new costing information(Shields and Young, 1989).

They finish their analysis by concluding that “it may be too early to judge thepropriety of changes taking place (or failing to take place) . . . The empirical evidencefor the take up of new accounting ideas is not yet substantial” (Bromwich and Bhimani,1994, p. 208). Clearly, they saw hope in the years ahead. However, in the yearsfollowing Bromwich and Bhimani (1994), evidence of increased adoption of SMAcontinued to be weak. In 1996, in a special issue of Management Accounting Researchthat was devoted to SMA, Tomkins and Carr (1996) claimed that SMA was stillill-defined and most of the SMA research was at the conceptual level. They stated thatup to that time, there were no more than 20 key articles in mainstream academicjournals. Much of the evidence of SMA adoption was in professional journals.

An additional perspective – Roslender and HartRobin Roslender has published a series of papers that review developments in SMA,from a sociological perspective. Roslender’s (1996, p. 533) review assessed the responseof some “critical” accountants to the emergence of SMA. He considered many of thepapers as too negative, having a “dismissive tone with the almost predictableconclusion that there is little here that promises to contribute to a more attractiveaccounting praxis”. He classified the critiques of SMA into three categories. The firstcategory critiques Kaplan and Johnson’s 1987 book, and includes Ezzamel et al. (1990)who use a Foucauldian framework, Hopper and Armstrong (1991) who take a Marxianapproach and Johnson himself (Johnson, 1992, 1994) who provides an “autocritique”(that is, a critique of his own work). The second category of critiques are case studiesthat promote accounting for strategic positioning, including Bhimani and Pigott (1992),Miller and O’Leary (1994) and Munro (1995). Roslender’s third category of

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commentaries is papers written as a response to Johnson’s autocritique (Ezzamel, 1994;Williams et al., 1994; Yuthas and Tinker, 1994).

In general, Roslender asserts that many of the critical accounting commentariesfocus on the threats that are posed by the introduction of various SMA techniques andframeworks. However, Roslender is more positive and believes that while threats haveto be acknowledged, the opportunities that are captured in SMA frameworks must alsobe considered. In particular, he focuses on the “empowerment option” that is capturedby many of the SMA techniques, which, while being perhaps based on “questionableunderpinning”, were worthy of exploration.

Roslender and Hart (2002) provide a framework for integrating managementaccounting and marketing, to advance the potential of SMA. Building on Roslender(1996), Roslender and Hart (2002) distinguish between the approaches that have beentaken to integrate management accounting and strategy, from those which seek tointegrate management accounting and marketing, and generally find shortcomings inthe first approach. They return to the initial formulations of Simmonds (1981) torefocus on the link between management accounting and marketing. In presentingtheir critique, they categorize SMA research into three groups.

First is the area of quantitative research which links strategy and managementcontrol systems, of which Simons (1987) is one of the first examples. Simons’ paper ledto a stream of research that has continued to the present day, which focus largely oncontingency relationships (see Langfield-Smith, 2007, for a review of the literature).The focus of these papers is on how MCS can be designed to directly support thespecific strategy of the firm. The notion of “fit” between strategy, MCS and othercontextual variables is the core of such studies. Roslender and Hart (2002, p. 260) arequite critical of the contribution of this body of work, stating that it only results in a“more strategically informed approach to management accounting”.

The second group, which they assess more positively, is the balanced scorecard(BSC) literature (Kaplan and Norton, 1992, 1996). Rather than adopting the moretraditional control bias of MCS, Roslender and Hart (2002) state that the BSC “putsstrategy and vision, not control, at the centre” (Kaplan and Norton, 1992, p. 79) to alloworganizations to compete more effectively. However, they are critical of the BSC asplacing strategy as a higher order preoccupation to management accounting, so thatmanagement accountants become “guardians of strategy providing a mechanism thatwill allow their counterparts in the other business functions to successfully accomplishstrategy” (p. 261). They consider that the greater contribution of the BSC is that it is atool that is used by managers across the organization. Interestingly, Roslender andHart (2003) point to some management accountants regarding the BSC as their own,whereas in reality is has been adopted far more broadly by many disciplines. The BSC,and to a lesser extent ABC, are SMA techniques which have a wide recognition beyondthe accounting discipline. The BSC, in particular, is part of the teaching curriculum inmany fields, including management, marketing, information systems, strategy andoperations management.

The third group relates to SCM research, as presented by Shank and Govindarajan(1989). With its tools of value chain analysis, strategic positioning analysis and costdriver analysis, SCM explicitly links management accounting with strategicmanagement, so there is a far greater precision that can be attributed to SCM,compared to SMA.

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By focusing on the marketing, rather than the strategy link, Roslender and Hart(2002) view target costing as providing a strong foundation for SMA, and present“brand management accounting” as providing a further dimension of the target costingphilosophy. They envisage brand management accounting as encompassing basicmeasures that focus not only on market share and market growth, but measures ofbrand strength; brand awareness, brand recognition and brand loyalty. It would alsoemphasize brand income statements, informed by customer profitability analysis, andanalysis that focuses on price sensitivity and price/value tradeoffs. In a field study often organizations, Roslender and Hart (2002) reveal the growing importance of brandsfor company success and the varying degrees of cooperation between accounting andmarketing.

Roslender and Hart (2003) build on the concept of integration of managementaccounting and marketing as providing the new direction in SMA. They see thesynergistic relations that are needed to progress SMA as being at the opposite end ofthe spectrum from traditional relationships. These relationships will require managersto abandon their discipline-focused practices to adopt greater inter-functionalco-ordination, and possibly more toward an area that they term “strategic marketingmanagement accounting”.

A review of some evidenceThe published works that address SMA fall into several camps. These includenormative papers that focus on case studies of the implementation of specific SMAtechniques emanating mostly from the professional literature; descriptive case studiesused largely for teaching purposes and to demonstrate the benefits of SMA (or SCM);case studies or fieldwork that are grounded in theory that focus on a variety of topics,and; surveys of practice that gauge the adoption and/or benefits of SMA and of SMAtechniques.

An analysis of many of these works have been captured in review papers that haveappeared in academic journals or in books (see, for example, Anderson, 2007; Ansariet al., 2007; Bromwich and Bhimani, 1994; Gosselin, 2007; Roslender and Hart, 2003).Indeed, the number of publications, in both the professional and academic literatures,that address SMA runs into the thousands. Thus, in this paper, some key publicationswill be reviewed to give a flavour of the type of work and findings that have emergedsince the early 1980s.

North American case studiesMany of the major case studies that appeared in the 1980s and 1990s were written forteaching purposes, and sometimes were also captured in academic papers and books.In the main, these case studies were not theoretically-based, and focused on “real life”demonstrations of the benefits of moving away from “traditional” costing techniquesand adopting a particular SMA technique.

Kaplan (1990) is a book that consists of a series of case studies that were originallypresented at a colloquium held at Harvard Business School in January 1989. A commontheme for each case study presented in the book is the recognition of the problems ofold measurement systems (usually costing systems), the vision for improvement andthen the early stages of implementation of a new system. In his introduction to thebook, Kaplan highlighted two unresolved issues that link the case studies. First, each

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case study captured the move away from financial measures, towards non-financialmeasures at the operational level, but it was unclear as to what was the appropriatemix at each hierarchical level of the organizations. Second, it was not clear how todesign incentive and reward systems for manufacturing managers to supportcontinuous improvement. Kaplan considered that link the between localmanufacturing measures and long-run measures of competitive success wouldbecome clearer over the following years.

Classic case studies include the Portable Instrument Division (PID) of Tektronic,Hewlett Packard’s Roseville Network Division and Zytec (Cooper and Turney, 1990).These cases were issued as individual teaching cases by Harvard Business School, aswell as appeared in a single integrating chapter in Kaplan (1990). Each of the threecases demonstrates how ABC was used to motivate improvements in themanufacturing capabilities of the firms. The three ABC implementations weredesigned to provide, respectively, incentives to reduce the number of unique parts usedin the manufacture of products, to improve the design of products utilizing cost andperformance tradeoffs and to reduce the lapsed time from the order of componentsfrom the supplier to the shipping of the product to customers. The objective of eachABC implementation was not to determine accurate product costs, but to provideincentives for certain managerial decisions. In each case, the judicious choice of costdrivers influenced management decisions to change the product design or processdesign. Cooper and Turney (1990) explained the benefits of implementing such“internally-focused” ABC systems, but also highlighted the risk of allowingmotivational effects to dominate the need for accurate product costs, particularly ifthe “motivational” product costs are the only costs available within the firm. There isalso a credibility issue associated with such product costs and a lack of acceptance ofthe product costs by managers, when they are known to be inaccurate.

Berlant et al. (1990) relate another case of Roseville Networks division of HewlettPackard, where ABC was implemented to uncover accurate product costs. It wasrevealed that production managers had developed “private” costing systems whichwere affirmed by the new ABC system. Thus, the new costing system provided acommon language which was accepted by operations personnel and accountants. Inthis case the message was how the new system became an effective communicationsystem which cut across functional boundaries and resolved a long-runningatmosphere of conflict and suspicious, but also facilitated its informational use.

A research study sponsored by the Institute of Management Accountants, Cooperet al. (1992) focused on eight ABCM (activity-based cost management) case studies andhighlighted the benefits of such systems, the implementation steps, key designdecisions and pitfalls that can effect success. The book was designed to capture the“state of the art” of ABC principles and implementation at that time. In brief, thefindings were as follows. First, ABCM is a management process, not just a costmanagement system, which allows managers to manage activities and businessprocesses across the firm. Second, ABCM provides benefits for strategic andoperational decisions. Third, ABCM can co-exist with conventional financialaccounting systems. Finally, management must implement processes ororganizational change and implementation to reap the benefits from the insightsthat result from an ABC analysis (Cooper et al., 1992, pp. 1-2). Interestingly, as with the

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case studies reported in Kaplan (1990), the eight cases seem to be either pilot studies orwere in the early stages of implementation.

But not all case studies have focused on ABC or ABM. Cooper (1996c) providedsummaries of 23 Japanese case studies which illustrate the successful use of Japanesestyle cost management such as target costing, value engineering andinter-organizational cost management. However, it was not clear that theseexperiences were directly translatable to a non-Japanese context.

Theoretically-grounded case studiesThe case studies that can be found in the research literature are wide ranging and focuson many different aspects of accounting and strategy. Rarely have they focused simplyon adoption or implementation of SMA, or of one of the SMA techniques. Rather, theyhave tended to emphasize the complexity of the accounting-strategy relation, and tofocus more on processes and issues concerning the use and the influence of accountinginformation.

One of the “classic” case studies is Roberts (1990), which is a study of strategicchange in a large decentralized company (Conglom). This study relied on structurationtheory to focus on processes of accountability. Giddens’ (1976, 1979) structurationtheory distinguishes between structures, which are static and consist of practices, andstructuration, which is the process where actors drawn on structures and effect change(Ahrens and Chapman, 2002). In Conglom, accounting information was a powerfulinfluence in shaping managers’ activities and relationships, and created an externalimage of success. However, the excessive emphasis on financial returns concealedsome potentially damaging strategic outcomes for the company. Strategy formationand implementation processes were thus compromised. The distorted communicationsthat emanated from accounting information needed to be countered with informalcontrols, such as management meetings, in an attempt to resolve the conflict betweenaccounting information and strategy.

Miller and O’Leary (1997) provide a case study of Caterpillar which focuses on theprocesses used to align capital investment decisions with strategy. The case studytracks the changes that were made to capital investment evaluation processes, as thebusiness strategy changed from a mass production technology to flexiblemanufacturing systems. Capital investment proposals were evaluated as discreteprojects, which seemed appropriate to managing investment in the company’s massproduction technologies. However, with the move to flexible systems, theinterrelationships between projects needed to be explicit, so investments came to beevaluated through the creation of new responsibility centres, called “investmentbundles”, which consisted of diverse and mutually reinforcing assets needed tomanufacture a set of core product modules. Capital investment implementation wasmanaged through highly visible performance reports (called bundle monitors), thatbecame one of the three major measurement systems for cost management at the plantlevel. The intense involvement by senior managers in the management of theimplementations through consultation, meetings and reports was important inemphasizing the critical strategic issues and in encouraging managers to orient theirthinking towards the new strategy. The case provides a demonstration of the useinteractive controls (as defined by Simons (1995)).

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Chenhall and Langfield-Smith (2003) is a case study that examines how amanufacturing company used a group performance-related based reward system(gainsharing) to achieve strategic change over a 15-year period. This case draws onmotivation theories and theories of trust. During the first ten years of the gainsharingsystem, manufacturing performance was high and this was argued to be a function oforganizational trust and in operation of the gainsharing system. The specificperformance measures that underpinned the gainsharing system were adjusted overtime, as the strategic direction of the company changed. However, in an increasinglycompetitive environment, structural change (the adoption of manufacturing teams)was introduced in an attempt to sustain high levels of employee performance. Theadoption of teams promoted personal trust and the sharing of values and goals, but didnot result in significant performance improvements. This performance shortfall wasattributed to the continuation of the gainsharing system, which was seemed asincompatible with the development of personal trust.

Roslender and Hart (2003) presented ten case studies of companies and found therewas limited evidence that SMA techniques, such as attribute costing, strategic costanalysis, and lifecycle costing were being used or understood by managers. However,in their pursuit of “brand management accounting”, they found that managers had apositive attitude towards the benefits of exploring closer relationships betweenmanagement accounting and marketing. In some of the cases, where there was a highlevel of interfunctional cooperation. Also, in the reported case studies, VBM-basedmeasures of brand performance were being used and there was a high level ofawareness of such approaches. Roslender and Hart (2003, p. 274) saw the possibility ofthe emergence of a new subset of SMA developments, namely brand accounting.However, they concluded by reflecting on the influence that a specific consulting firmhad on the adoption of VBM in each of the cases, and also whether brand managementaccounting, like SMA, might be another “figment of the academic imagination”.

An interesting aspect of the case studies outlined in this section, is that they focuson the use management accounting information to support strategy or strategicdecision making, and also the impact that information can have on organizationaloutcomes. This seems to be a more fruitful and interesting focus, compared toassessing levels of adoption and implementation of specific SMA techniques.

Surveys that address adoption and implementationOne of the earliest surveys of practice was commissioned by the National Associationof Accountants (NAA) in the USA and by CAM-I (Howell et al., 1987), and this was alsopresented in a series of five articles in the professional journal ManagementAccounting (see for example, Howell and Soucy, 1987). The survey was sent to 1,000preparers and 1,000 users of management accounting information, and 217 others[1],working in many industries. This was followed by 22 on-site interviews to study thestate of art in management accounting practice in manufacturing industry at that time.The areas covered by the survey included capital investment justification, costaccounting and performance measurement. In general, they found a wide range oftraditional management accounting practices in place, such as job costing and processcosting, but little evidence of “advanced” accounting practice, even though advancedmanufacturing technologies were widely adopted. There was a high level ofdissatisfaction with the cost data by preparers, who did not find it useful for decisions.

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Areas of criticism included the methods used to allocate overheads to products. Themajor obstacles to adopting improved product costing information were managementpolicies and priorities, habit and a lack of understanding of alternative methods. Whilenon-financial measures, such as those relating to quality, deliver and service, wereavailable, management accounting reports tended to focus on financial measures,which was viewed with a high level of dissatisfaction by users (69 per cent weredissatisfied or thought improvement was needed) as well as preparers (57 per centresponded unfavourably).

Two other surveys published in the few years after the NAA study revealed similarresults. Enmore and Ness (1991) studied cost management practices in mid-western USmanufacturing companies and found the high implementation of advancedmanufacturing technologies was not accompanied by changes in the cost accountingsystems and nor were most companies planning to make changes. Cohen andPacquette (1991) surveyed US manufacturing and service companies and also found avery small take up of new costing systems and limited awareness of the problemsassociated with their traditional volume-based costing systems. 67 per cent usedstandard costing systems and 62 per cent used DL as a product allocation based andonly 13 per cent used different costing systems for internal management purposes.Karmacker et al. (1991) conducted a survey of US manufacturing plants and founddissatisfaction with the orientation of the costing information that was provided forinternal decision making purposes. They attributed the slow pace of change to the costof change relative to the potential benefits of the new systems.

Bright et al. (1992) conducted a major survey of 677 UK manufacturing companies,of which more than half had over 500 employees. They reported confusion in themanner in which various advanced costing tools were adopted and used. For example,in many companies costing information was collected but not reported to managersand costing systems grew in an ad-hoc, unplanned manner. Interestingly, 32 per cent ofcompanies reported using ABC, and a further 28 per cent planned to use the technique.A similarly high usage and planned usage was reported for SMA (44 per cent), cost ofquality (52 per cent), target cost planning (46 per cent) and throughout accounting (40per cent). These results are difficult to reconcile with those of other surveys doneduring this period. The authors state that this might be an outcome of confusion withterminology.

There have been many surveys of practice in the UK over the past 25 years. Ofparticular note is a series of surveys by Innes and co-authors (including Innes andMitchell, 1995; Innes et al., 2000). In Innes et al. (2000) a comparison was made betweentwo surveys of ABC practice in the UK, undertaken in 1994 and 1999. Overall, theyfound that there were few changes in use over that period. However, the proportion ofABC users and those companies currently assessing ABC had dropped, and thepercentage companies rejecting ABC had increased slightly. They interpreted theirresults as indicating a leveling off in interest in ABC.

Gosselin (2007) provides a comprehensive review of 1,477 papers published on ABC,including 25 surveys published between 1990 and 2005. He points to the surveyevidence which highlight an “ABC paradox”. That is, while ABC is considered bymany accountants and managers as very attractive, well known and accepted as avaluable technique, and studied in most business schools, the research evidence pointsto a low level of adoption globally. The findings of the surveys reported in Gosselin,

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indicate that the majority of organizations have never considered ABC, and some firmswhich did adopt it in the 1990s, have since abandoned it. Surveys indicate adoptionrates as low as 2 per cent (Ask and Ax, 1992, in Swedish engineering firms), or as highas 36 per cent (Institute of Management Accountants, 1993), in a survey of 1,500 CMAsin US firms). However, it has been suggested by some authors (Institute ofManagement Accountants, 1993) that some adoption rates might be overstated, due toconfusion over ABC terminology used in the survey instruments and non-responsebias. Gosselin also reports, drawing on his own experience, that ABC models differdramatically between firms, which adds to the confusion and imprecision of the surveyresults.

Surveys of practice also typically fail to address the questions as to why ABC isadopted or not adopted, and what ABC is actually used for in firms. While Gosselinsummarizes the results of prior ABC surveys to identify a series of contextual factorsthat affect ABC adoption – competition, environmental uncertainty, organizationalstructure, product diversity, production process, size, strategy and ownership by amultinational firm – the impact of these factors differs for each stage ofimplementation of ABC.

Even the assessment of success of ABC, which is attempted in some surveys, isproblematic. Although, Gosselin assesses that measures of success have improved insophistication, from the first attempt by Shields (1995). However, Gosselin concludesthat the evidence of the success of ABC implementations, or the positive impact of ABCon organizational performance is not strong. Recent studies that have assessedperformance outcomes of ABC implementations include Cagwin and Bouwman (2002),Anderson et al. (2002) and Anderson and Young (1999) who provide evidence of a linkbetween ABC and financial performance.

In a wide-reaching review paper of target costing, Ansari et al. (2007) claimed thattarget costing is being increasingly adopted by a number of leading firms through theworld, even pointing to some diffusion in India and Malaysia. They point to individualcompanies in the USA, like Chrysler and Caterpillar, who attribute their financialsuccess in the mid-1990s to the adoption of target costing. They argued that while TCis fairly mature in Japanese assembly industries, it is fairly young in the USA andEurope and is found in some auto and assembly companies. They stated that manymanagers underestimate the potential of target costing, and this may be one reason forlow adoption.

Ansari et al. (2007) presented a comprehensive review of more than 80 publicationsin English and 100 in Japanese that deal with target costing. These are mostlynormative or technical papers, but also include case studies of TC success, includingthose in the US automotive industry. But they do point to the work of Koga (1999) andKoga and Monden (2000) who found many companies in the camera manufacturingindustry did not meet cost targets. There are only a few surveys of practice. Tani et al.(1994) found that 109 of the corporations surveyed had implemented target costing.Boer and Ettlie (1999), in a survey of 126 US corporations, found that many estimatedcosts in the product design phase. This could be interpreted as a very partial, orpreliminary implementation of target costing.

Guilding et al. (2000) were critical of the progress of SMA stating that it has receivedlittle attention beyond the confines of conceptual consideration. Thus, in their paperthey identify a range of SMA practices – attribute costing, brand value budgeting and

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monitoring, competitor cost assessment, competitive position monitoring, competitorappraisal based on published financial statements, life cycle costing, quality costing,strategic costing, strategic pricing, target costing and value chain costing – and studythe adoption and benefits of these practices across large companies in New Zealand,the UK and the USA. Overall, they found most practices were not adopted widely.Competitor accounting and strategic pricing were the most widely used. However, asfound in some prior surveys, perceptions of the merit of SMA practices were higherthan the level of actual usage.

Interestingly, Guilding et al. (2000) found that there was very limited familiaritywith the term SMA, and the term SMA was virtually unused within the organizationssurveyed. However, there was slightly more familiarity with the term in the UK, whichis not unexpected, given the origins of SMA and the considerable prominence thatSMA has been given by UK professional body, CIMA. Roslender and Hart (2003) alsofound that SMA had limited meaning for managers in their study of ten companies.

The role of accountants in the adoption and implementation of SMAOver 25 years ago, Simmonds (1981, p. 26) declared that accountants have highlydeveloped skills to provide the necessary bases for undertaking SMA:

Management accountants are spending a significant proportion of their time and effort incollecting and estimating cost, volume, and price data on competition and calculating therelative strategic position of a firm and its competitors as a basis for forming businessstrategy.

Dixon and Smith (1993) also argued that the analytical, decision-making and financialskills of management accountants provide them with the potential for contributing tothe strategy evaluation process. Case studies by Shank and Govindarajan (1988) andRickwood et al. (1981) provide examples of how management accounting can developto embrace a more strategic context. Dixon and Smith (1993) propose further thatmanagement accounting can link strategy with shareholder value analysis and alsoassist in the valuation of potential acquisition targets. Despite proposing thatmanagement accountants were suited to promoting and implementing SMA, Dixonand Smith (1993) concluded by acknowledging that some of the SMA processes mightalready be undertaken by other functions within a firm, such as the marketingfunction, so in these cases, the role of management accountant would be to audit suchdata. However, they did see a great future for SMA in bringing together differentfunctions and disciplines within the firm. They highlighted that the UK professionalbodies were responding to the call for SMA, through their professional training, andacknowledged that SMA was embryonic but “through time both practitioners andacademics are likely to improve techniques for collecting and analyzing data” (Dixonand Smith, 1993, p. 617).Bromwich and Bhimani (1994) supported this argument as did Shank in his earlierworks, and in his final chapter (Shank, 2007), he still held to the notion thatmanagement accountants have the intellect and skills but circumstances are such thatCFOs and companies have other priorities.

In a recent review of the origins and future of SCM, Anderson (2007) providesevidence of research in other disciplines in laying the groundwork for understandingSCM, and seems ambivalent about the need for specifically trained accounting

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practitioners to reside in corporate accounting departments to use the narrow range ofMA tools. However, she claims that management accounting researchers are wellsuited to the task of creating a unified body of SCM knowledge. This is due to theirtraining in the economics of the firm, and in the core accounting principles ofmeasurement and management control. Gosselin (2007) suggests that a successfulimplementation of ABC requires a multi-functional team, where accountants workclosely with operations and marketing employees.

However, some commentators have a different view. Lord (1996) disagrees withSimmonds’ assertions that management accountants with their highly developed skillsare in the best position to exploit opportunities for cost reduction. She contends thatoperational people have intimate knowledge and experience of the firm’s processes andproducts.

Two professional articles published by Cooper at around this time in the USpractitioner journal,Management Accounting (Cooper, 1996a, b) reflect this viewpoint:

As companies move to cost management, they will need more management accountinginformation but fewer management accountants, and the remaining managementaccountants will play a supporting role, not a leadership role. For activity-based costmanagement systems to be effective, everyone in the company must view them as costmanagement tools rather than as accounting tool. (Cooper, 1996a, p. 20).

A similar view was expressed by Chenhall and Langfield-Smith (1998) in a paper thatpresents five case studies of the implementation of innovative performancemeasurement systems. The main case study, Cleanco, developed three newperformance measurement systems. These initiatives were managed largely by thehuman resources department, and did not involve the accounting function, which waspreoccupied with taxation and other financial reporting matters. Functional managersat Cleanco were not very complimentary about the skills or customer service providedby the accountants. In this paper, it is argued that accountants have a lot to offer inbeing involved in these developments but need to develop not only sufficient technicalskills, but also social skills. In a subsequent case study of the development of againsharing performance measurement and incentive system that was linked tostrategic goals, Chenhall and Langfield-Smith (2003) again find that the accountantswere not involved in its development, which was the province of manufacturing andHR.

Coad (1996) argued that to undertake SMA projects, accountants need to worksmart and hard. Smart work involves choosing clever and ingenious approaches todeal with a task, and then modifying the approach intelligently and resourcefully whenneeded. Hard work is the use of effort to complete the task. Coad argues that SMArequires a learning orientation, as this motivates both smart and hard work, whereas aperformance orientation only motivates hard work, and is not sufficient to undertakeSMA. He speculated that in addition to undertaking smart work, the effective strategicmanagement accountant requires high levels of communication skills and the ability toempathize with others. This has important implications for the training of accountants.He saw the future role of management accountant as remaining the acknowledgedexpert in costing and accounting, but also becoming including a coaching or advisoryrole, as SMA activities move beyond the accounting function. Clearly, this places manychallenges in the path of future accountants. In what was probably his last publication,

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Shank (2007) came to reluctantly agree with Cooper’s assessment of the inability ofaccountants to rise to the challenge of SMA.

Conclusion – what have we achieved and where do we go next?In this final section, the state of play of SMA is assessed. The success of SMA as aconcept, and of specific SMA techniques, is reviewed. The future role of managementaccounting as the “owner” of SMA is considered and opportunities for future researchon SMA are identified.

Has SMA been widely adopted?The above discussions would be considered by some as indicating a lack of success ofSMA. Clearly, in the 1980s, SMA started with great promise and for many years therewas much enthusiasm from the professional and academic accounting communities.Overall, the clear message that emerges from empirical studies is that there is nocompelling evidence that SMA, in the form envisaged by Simmons, is used widely inpractice. The normative papers extolling the benefits of SMA and early conceptualdevelopments have not led to widespread adoption of SMA, and the lack of widespreadadoption also makes it difficult to determine the success or otherwise of SMAimplementations. Also, the term SMA is not well understood by researchers or inpractice, and in some cases the term is not even recognized.

Evidence on the widespread adoption of specific SMA techniques is also not strong.The main evidence relates to activity-based costing. There have been several surveysof practice and case studies of ABC implementations. However, there is consistentevidence that adoption has been low, and may have even decreased over time, andmany companies have not even considered implementing ABC (see for example, Inneset al., 2000).

There has been much written about the success of Japanese companies, and thebenefit of many Japanese management accounting techniques, such as target costing,functional analysis and value engineering. However, there is limited evidence ofwidespread adoption of Japanese-style SMA techniques, outside of Japan, and thoseWestern companies that have adopted are often subsidiaries of Japanese companies.Twenty-five years down the track it is difficult to continue to argue that it is early daysfor SMA, and that there exists an accounting lag. In addition, several case studiesreveal that SMA tools and techniques are sometimes implemented without theinvolvement of the accounting function, by “shadow” accounting staff.

The impact of SMA on practice, scholarship and accountingSo has SMA had any impact? It can be argued that SMA has made an impact onpractice, scholarship and accounting, but not in the way that was envisaged by theSMA founders.

Anderson (2007) argues that SCM has been a success because it has permeated theresearch and teaching of virtually all management disciplines. She sees the futurechallenge is for management accounting researchers to engage with other disciplinesand to integrate what has been learned from other disciplines with managementaccounting theory. Similarly, Gosselin (2007) suggests that ABC can be regarded assuccessful, due to its influence on the development and renewal of managementaccounting. He also claims that ABC has enhanced the role and created positive

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perceptions of management accountants. However, he also points to the ABC paradox,the gap between conceptual strength and awareness of ABC and the low levels ofadoption and implementation.

Otley (2001) claims that SMA has had a major impact on the thinking of practisingmanagement accountants and managers. This may be due to the influence of the booksand papers written by key SMA advocates, such as Shank, Bromwich, Cooper andKaplan, but also due to the influence of activities of professional accounting bodies(particularly CIMA, in the UK, or CPA Australia) who have sponsored research reportsand included SMA as part of professional training and professional developmentprograms. This has created a broad awareness of SMA tools and techniques over manyyears.

Management consultants who have promoted specific SMA techniques have alsohad a strong influence, as have high profile books promoting techniques, which havesometimes been written by those same consultants. We have the consulting firms tothank for the widespread promotion of techniques, such as ABC, VBM, and the BSC, inmany western countries in the 1990s. High profile publications, such as the HarvardBusiness Review, have also brought many of the SMA techniques and processes to theattention of managers globally.

SMA can be regarded as a success because of the way that is has permeated othermanagement disciplines. SMA as a term may be “a figment of the academicimagination”, but if we move beyond the terminology, we can examine what has beenachieved in more subtle ways within organizations and across management in general.As Anderson (2007) indicates, there is a lot of “strategic” management accountinghappening in organizations, but not always with the leadership or the involvement ofthe accounting function.

Some of the techniques that we often consider are a part of the managementaccounting toolbox are considered by other disciplines as their own. Some conceptsthat we classify as SMA have entered the province of “management”. The way thatmodern performance measurement systems are implemented and managed inorganizations provides an example. In universities, many aspects of SMA are taughtnot only as part of the management accounting curriculum. They can also be found insubjects in the marketing and management and even IT areas. This is the case for theBSC, cost management, process analysis, and KPIs. The BSC, in particular, isconsidered by many to be a management tool and not the province of accountants.Software vendors and internal IT departments have also been important in this area;some SMA tools are implemented as an outcome of software implementations. It isinteresting to consider the impact that packages like SAP have had on the type ofaccounting implementations found in organizations.

As well as some techniques infiltrating many management disciplines, so has someof the language. While the type of ABC systems envisaged by Cooper and Kaplan maynot have been implemented, it is not unusual for both accountants and managers totalk about activities and cost drivers. This is now part of the language of business. Theapparent low adoption of ABC systems may not take into account that many aspects,that form part of an ABC system, may now have slipped into accepted practice. Thisincludes the more informed use of overhead cost drivers and the broadening of productcost beyond manufacturing, to include up-stream and down-steam costs. The term“activity-based costing” may not be used in these situations. Many of the surveys of

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ABC adoption do not focus on the use of these component practices. To focus on the“low adoption” of ABC implies it has had little impact on practice. Not allimplementation of SMA techniques are “as per the textbooks”. In considering tenorganizations, Bhimani and Langfield-Smith (2007) found high variety in the form andnature of strategic management accounting processes used within organizations,which was in contrast to the prescriptions of the SMA literature, which focused on thestructure and formality of strategic activities and a need for a balance of financial andnon-financial information to support strategic processes. There were differences acrossfirms as to what they considered to be strategic and in the role played by financial andnon-financial information.

Does it matter if the SMA developments are not managed or “owned” by theaccounting function? The key issue is to consider whether management accountantshave any specific or unique skills that would benefit SMA implementations andmanagement. Several commentators have argued that they do (See, for example,Anderson, 2007; Dixon and Smith, 1993; Simmonds, 1981).

Anderson (2007) argues there is a case for the development of a body of work inSCM to integrate fragmented developments into a coherent body of knowledge. Thiscreates an opportunity for management accounting researchers. However, thereremains the difficulty of whether these frameworks, if developed by managementaccountants, can be transmitted easily to broader management disciplines. In the sameway that Kaplan popularized activity-based costing and the BSC, this may requirehigh-profile personalities, books and activities. It is up to the accountants to make sucha move. The second issue relates to the future role and identity of managementaccountants. Note that this is not management accounting as a discipline area – clearlymuch of the management accounting in organizations is undertaken by manyfunctional areas, not just accounting – it is management accountants as a profession.Cooper summed up his concerns:

To survive, management accountants must develop skills in systems design andimplementation, change management, and strategy as well as cost management andmanagement accounting. Individuals involved in management accounting have to accept thattheir professional lives are going to be altered significantly over the next decade by thegrowing importance of cost management. For management accounting professionals, thecentral challenge lies in choosing their future role. Management accountants who do notdevelop the right skill set either will have to develop functional expertise to allow them totransfer to the functional areas of the company or risk finding themselves at a careerdead-end (Cooper, 1996b, p. 40).

Future research opportunitiesThe term, “strategic management accounting”, may no longer be very useful whendescribing a set of advanced management accounting techniques or an approach tocompetitive financial analysis, so to be concerned with identifying and locating SMAwithin organizations does not seem to be a productive exercise. We know that the term“strategic management accounting” is not used widely in practice, and it is specifictechniques and processes, such as cost management, strategic analysis, productcosting, performance measurement, which are the more relevant and recognizablefocus. The generic terms used to describe these techniques may have been in use formany years. However, it is the way that we undertake the techniques that may have

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changed. Product costing practices undertaken in the 1970s or 1980s may look verydifferent from those same practices in 2007. Similarly, the style and content ofperformance measurement systems have changed over the decades, to reflect a morestrategic orientation.

There is limited value in conducting surveys of practice that focus on rates ofadoption or stage of implementation of specific SMA techniques, such as ABC. Thedecrease in published research in this area supports this reflection. As the apparent lowadoption of ABC systems has not taken into account that many aspects that were firstdeveloped as part of an ABC system, may now have slipped into accepted practice, itmight be useful to examine those specific practices. These might include studying howcost drivers are used to cost product, services and other activities.

Future research might focus on considering the nature of contemporarymanagement accounting work and management accounting information that is usedwithin organizations. It would be useful to understand how techniques diffuse intomore general practice and into organizational processes. Target costing is an elaboratecost management technique, which in its fully-developed form, requires the adoption ofan intense and ongoing cost management discipline across all aspects of the life cycleof a product, including product design, manufacturing process design, manufacturingactivities and after sales support. However, some of the practices associated with targetcosting, such as functional analysis or the market-driven approach to costmanagement, may already have be adopted successful by some organizations andnow be part of the accepted practices. There is much we can learn about how theprinciples underlying SMA techniques that can be used to inform wider organizationalpractices and processes.

Given the spread of management accounting work to other functions theorganization future research should not just be focused on the output of accountingdepartments. Understanding how management accounting practices come to theattention of organizational actors and how they are implemented and developed willcontinue to be a source of interesting research.

Note

1. The response rates were 79 per cent for preparers, 18 per cent for users and 26 per cent othercorporate respondents.

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Corresponding authorKim Langfield-Smith can be contacted at: kim.langfield-smith@edu.au

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